CTP Ethical Standards & Professional Conduct 3

Question 1

Which of the following best describes the 'reasonable basis' standard for tax return positions under Circular 230?

Accepted Answer

The position has approximately a 5-10% or greater chance of being sustained

Answer

The reasonable basis standard requires approximately a 5-10% or higher probability that the position would be sustained on its merits.

Question 2

A tax professional receives a subpoena for client records. The appropriate first step is to:

Accepted Answer

Notify the client and seek legal counsel before producing any records

Answer

The practitioner should notify the client and obtain legal counsel to assess privilege claims and proper scope of production.

Question 3

Under Circular 230, a 'covered opinion' is best described as:

Accepted Answer

Written advice about a listed transaction or a principal purpose transaction marketed to multiple clients

Answer

Covered opinions under Circular 230 §10.35 include written advice on listed transactions and principal purpose transactions marketed to multiple clients.

Question 4

A practitioner who knows a client is currently under criminal investigation by the IRS should:

Accepted Answer

Ensure the client retains criminal defense counsel and consider whether the practitioner can ethically continue

Answer

The practitioner must advise the client to retain criminal defense counsel and assess whether the practitioner can continue without creating conflicts.

Question 5

Which of the following is NOT a permissible sanction under Circular 230 for practitioner misconduct?

Accepted Answer

Criminal prosecution by the OPR

Answer

The OPR (Office of Professional Responsibility) administers civil sanctions; criminal prosecution is handled by the Department of Justice, not the OPR.

(CTP) Certified Tax Professional Practice Test

(CTP) Certified Tax Professional Practice Test

CTP Ethical Standards & Professional Conduct 3